3 thoughts on “Insurance, How it works.”

I think that the moral hazard in the Florida case was created by the knowledge that is the aria was declared a disaster aria federal funds would come to the rescue. Not a insurance problem at all. The banks also knew better than to finance there. They did it anyway. They should have made certain that their money was protected. More moral hazard. They could take risks because the money was cheap and they did not have to work for deposits. They could just lend the ones that they had more times. They were insured too by the government. If they had had to pay for that insurance or not have it at all they would have made the homeowners have insurance or loose their property to the bank.

If you don’t have insurance for floods then you don’t have it. I would not write an insurance policy for a flood for a house that is built under sea level and does not have good protection from storms. If I were to decid to do such a thing the numbers would tell me to set the price high. Not being able to get affordable insurance should tell you that you either have to build your house so that it can’t be destroyed by almost all storms or to not build it there. I understand that some houses are built to withstand a 200 MPH wind. Mine won’t but we don’t have those here any way. I am thinking of buying fire insurance myself. I can’t fix that. I don’t know if I will have to buy a lot of insurance I don’t want though. I am not concerned with water damage and if my tree falls down it will be away from the house. The winds simply don’t blow toward the house as far as I know. The tree is healthy so I am not concerned.
Much of the construction in Florida is silly. Cinder block and masonry construction with reinforced roofs makes a lot more sense there that trailers and 2/4 frame construction does. Give me a break. 2/4s are only 3.5 inches thick.

Insurance is not about getting your money back. It is about protecting what you have and getting more than your money back if something happens. Sometimes self insurance makes sense. North American Van lines is self insured the last I heard. It probably has a policy in case of an extraordinary lawsuit settlement but for ordinary accidents it puts aside money.
You are right for predictable expenses. You should save and pay for them. It is cheaper to do that. It is for the unpredictable events that you buy insurance. They happen to a few people or there would not be insurance against them but are rare.

I think part of your confusion is health insurance. It should not cover regular doctors visits of medications that you know that you are going to take forever. Things that you are certain are going to happen should be paid for directly. Why pay somebody a fee for paying them for you.
Nobody buys death insurance. Also it seems to me that a person can save for his own funeral too. You buy graves and tombstones. Since you don’t know when you will die there is room for a small insurance policy to protect your people from your burial expenses. Of course if you have the money who cares.